Recession: Domestic Airlines Face Bleak Future

Industry experts have projected that by the end of 2017 only three Nigerian airlines will be operating scheduled passenger service, which means that two more airlines may stop operation after Aero Contractors.

Domestic carriers are facing hard times owing to high cost of aviation fuel and a slumping Naira because almost everything used for airline operation is imported with foreign exchange.

With high cost of overseas maintenance, depleting passenger traffic due to economic recession and high cost of spares, many Nigerian airlines may not survive the next 16 months, industry insiders have predicted.

While announcing the discontinuation of scheduled service on Wednesday, the CEO of Aero Contractors, Captain Fola Akinkuotu said: “Unfortunately, the operating environment within and outside the airline have hindered any possible progress especially in the last six months when the Naira depreciated against the dollar, thus making it impossible for the airline to achieve its operational targets.

“The impact of the external environment has been very harsh on our operational performance, hence management decision to suspend scheduled services operations indefinitely effective September 1, 2016 pending when the external opportunities and a robust sustainable and viable plan is in place for Aero Contractors to recommence its scheduled services.”

Travel expert Ikechi Uko said Nigerian airlines over the years go through boom and bust; that this is the last part of the bust period and if there is no intervention of any kind, most of the airlines may not survive it.

He said that so far the two airlines that might survive are the ones on international operations, which access fares in foreign currency, adding it would be extremely difficult for airlines that earn Naira revenues in their operations as almost every service given to airlines is dominated in forex.

“This time needs strategic thinking. Nigeria cannot afford having only two airlines of less than 36 aircraft in its domestic service, so something has to happen; however, it reflects what is happening now on the national economy. No critical decision has been taken, no proper plan and no economic blueprint. There must be intervention of some kind to sustain the operation of some of the airlines,” Uko said.

Why it is more difficult for the airlines to survive is the huge expenses they pay to remain in operation and the low fares, which do not defray the cost of operation.

For them to sustain their operation they will have to receive support, which could serve as kind of subsidy, “because if they could charge profitable fares, most passengers will not be able to afford it and they would operate almost half empty flights,” an operator told THISDAY.

“For an airline to be profitable it has to operate each of its aircraft for approximately 11.5 hours per day. That is the global average. And for Nigerian operation to be profitable the cost of one-hour flight presently should be N45, 000, which obviously is beyond the means of many Nigerians. That is equivalent of N19, 500 of last two years when the exchange rate was N170 per dollar. Then fuel was about N90 per litre but now it is going for N200 to N230 per litre,” industry expert told THISDAY.

As catalyst to economic development, industry analysts are of the view that without scheduled air services the nation’s economy will crumble, “so government should not continue to feel unconcerned about the problem of the aviation industry because it affects the facets of the national economy,” an industry expert told THISDAY.

by Chinedu Eze /Thisday